Commodity price index rises again

The RBA has released its commodity price index for October, which rose 1.2% in SDR (currency weighted) terms – the key determinant of the terms-of-trade – but fell by 0.3% over the year:

Preliminary estimates for October indicate that the index increased by 1.2 per cent (on a monthly average basis) in SDR terms, after increasing by 2.1 per cent in September (revised). The rural, non-rural and base metals sub-indices all increased in the month. In Australian dollar terms, the index increased by 2.8 per cent in October.

Over the past year, the index has decreased by 0.3 per cent in SDR terms, led by lower LNG coal and oil prices. The index has decreased by 2 per cent in Australian dollar terms.

In Australian dollar terms, commodity prices declined by 2.0% over the past year.

The RBA commodity price index reported a 2.5% rise in commodity prices over the September quarter. Given past correlations, this would usually suggest a small rise in the terms-of-trade when the national accounts are released early next month:


However, the correlation broke in the June quarter, with the terms-of-trade rising sharply as the commodity price index tanked. Thus, we might get some mean reversion in Q3.

Unconventional Economist

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